HBOS yesterday gave its gloomiest assessment yet of the housing market, saying it expected prices to fall by 9% this year and that housing transactions would be down 45%.

Britain's biggest mortgage lender disclosed yesterday that it has almost £5bn of problem home loans on its books as it gave a downbeat forecast for this year's housing market.

The bank, which yesterday published the prospectus for its £4bn rights issue, said trading was 'satisfactory' although mortgage arrears were rising – particularly in its specialist home loans book.

Shares in HBOS fell by 6% yesterday to 296.75p – close to its 275p rights issue price – amid concerns about arrears and that HBOS might have to write down further assets in its Treasury portfolio, particularly on its exposure to US monoline insurers.

Separately, Standard & Poor’s lowered its credit ratings on Britannia Building Society, and revised its outlooks on HBOS and Yorkshire Building Society to 'negative'. It cited 'clear evidence of deterioration' in the riskier parts of UK mortgage lending and concerns about rising impairments in corporate lending.

Financial Times, The Times, Daily Telegraph

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